New Tri-Cities commercial real estate construction closed the year with one permit less than 2015, but unlike most of the 18 markets monitored by The Market Edge total, local permit value increased. The Tri-Cities was also the only MSA in East Tennessee where the estimated construction cost commercial projects increased.
Sullivan Co. led the seven-county region with 279 new permits followed by Washington Co. TN with 220. Both counties had modest year-over-year growth. Sullivan Co. was up 2.2%, and Washington Co. was up 1.9%.
Although Sullivan Co. saw more new permit growth, Washington Co. TN’s posted the most estimated project costs growth.
Total estimated cost for Tri-Cities projects last year was $317.3 million, up from $295.6 million in 2015.
Lawrence Yun, National Association of Realtors’ chief economist, says “the U.S. economy is poised for slight improvement in 2017. “Last year was the 11th year in a row of subpar GDP growth, but renewed corporate optimism leading to a focus on investment and a desperately needed boost in residential construction should pave the way for modest expansion this year of around 2.4%,” he said. “Steady hiring and low local unemployment levels are finally supporting higher wages and increased spending, which in turn bodes well for sustained demand for all commercial property types.”
Although the local economy has yet to reach pre-recession levels in nonfarm job creation and total output it is seeing slow improvement much like the national economy.
Yun says at least in the short-term, the possibility of a more tax-friendly business environment combined with the positive benefits of 1031 exchanges could quicken the pace of economic growth and support stronger commercial market fundamentals. The industrial sector — already enjoying increased demand from the soaring popularity of e-commerce — could see a further decline in vacancy rates if increased manufacturing comes to fruition and accelerates the need for more warehouse space.
“The positive direction for commercial real estate this year will be guided by the steadily expanding U.S. economy, which has legs to grow and continues to be one of the top economic performers and safest bets in the world,” concluded Yun.
Here’s a snapshot of how each area county finished the year in the number of permits and year-over-year change.
Carter – 35, unchanged from last year.
Greene – 68, up two permits.
Hawkins – 13, down two permits.
Sullivan – 279, up six permits.
Washington Co. TN – 220, up four permits.
Scott Co. – 9 – down four permits.
Washington Co. VA – 83, down seven permits.
Here’s the county-by-county snapshot for total estimated construction cost.
Carter – $7.5 million up $1.9 million.
Greene – $39.2 million, up $6.1 million.
Hawkins – $3.5 million, down $2.3 million.
Sullivan – $152.4 million, up $4.3 million.
Washington Co. TN – $74,1 million, up $15.5 million
Scott – $1.8 million, up $1.1 million.
Washington Co. VA – $39.8 million, down $4.9 million.